Best possible option for RBI is 25bps rate cut next week, SBI says

A rate cut of 25 basis points next week would be the best possible option for the RBI, State Bank of India says

"There is merit and rationale in going for a September rate cut. This will but require calibrated communication by the RBI as post June, the bar for rate cut is indeed higher," says Soumya Kanti Ghosh, group chief economic advisor

RBI's three-day meeting starts next week, with the decision due on October 1

Ghosh says inflation will continue to remain benign even in FY27, so there is no point in committing an error like August, where rate was not reduced with a neutral policy stance

Rate cut next week will also project RBI as forward-looking central bank - Ghosh

In June, RBI cut rate by 50 bps but changed stance to neutral, while in August it maintained status quo